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President Trump signed the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") on March 27, 2020, marking the
largest economic recovery package in U.S. history. The $2.2
Trillion rescue legislation provides $150 billion for hospitals and
other health care providers, direct payments and expanded
unemployment compensation provisions to U.S. workers and families,
and approximately $850 billion dollars in loans and grants to major
industries and small businesses.

The following provides a summary of some of the key stimulus
pieces of the legislation contained in the nearly 900-page Act to
assist all companies seeking financial relief from the myriad
challenges arising from the COVID-19 pandemic. Dickinson Wright
attorneys are available to provide on-the-ground counsel in
Washington, D.C., U.S. state capitols, and Canada's provinces
to navigate the network of federal/state/provincial recovery
programs and prepare for business resumption.

Highlights:

$500 billion to Treasury Department designated for business
loans for businesses impacted by COVID-19

$367 billion specifically designed for small-businesses;
however, any business whose "primary purpose" is lobbying
or engaging in political activity are not eligible for these
loans

$150 billion for state and local governments to address
spending shortages related to COVID-19 pandemic.

Provides $150 billion to states, territories, local and tribal
governments to use for expenditures incurred due to the public
health emergency with respect to COVID-19 in the face of revenue
declines, allocated by population proportions.

Distribution is based on population. No state shall receive a
payment for fiscal year 2020 that is less than $1.25 billion.

45% of a state's funds are set aside for local governments,
with populations that exceed 500,000, with certified requests to
the U.S. secretary of Treasury.

$3 billion set aside for District of Columbia, Puerto Rico,
Virgin Islands, Guam, Northern Mariana Islands and American
Samoa.

$8 billion for tribal governments.

Funds can be used for costs that:1) are necessary expenditures
incurred due to COVID-19; 2) were not accounted for in the budget
most recently approved as of the date of enactment; 3) were
incurred during the period that begins March 1, 2020, and ends Dec.
30, 2020

Small Business Loans under the Paycheck Protection
Program:

Government guarantee of loans for Payment Protection Program
under Section 7(a) of the Small Business Act increased to 100
percent through December 31, 2020.

After December 31, 2020, government loan guarantees will return
to 75 percent for loans over $150,000 and 85 percent for loans
equal to or less than $150,000

Insurance premiums

Mortgage, rent, and utility payments

Amounts forgiven cannot exceed principal amount of the
loan

Amount forgiven will be reduced proportionally by any reduction
in employees retained compared to the prior year, and further
reduced by a reduction in pay to any employee below 25 percent of
their prior year compensation

Employers who re-hire any employees laid off due to COVID-19
will be not be penalized

Amount of loan forgiven is excluded from gross income
for federal income tax purposes

Expands the organizations eligible for small business loans
under the Payment Protection Program.Eligible borrowers may not
employ more than 500 employees (unless provided otherwise by the
SBA for an industry) and includes not only small businesses, but
also:

501(c)(3) exempt organizations

501(c)(19) veteran's organization

Tribal businesses described in Section 31(b)(2)(C) of the Small
Business Act

Businesses with more than one physical location where each
location has fewer than or equal to 500 employees may also qualify
as eligible borrowers if the business concern is assigned a North
American Industry Classification System Code beginning with 72 at
the time the loan is disbursed

Waives affiliation rules for hospital and restaurant industry
businesses, franchises approved on the Franchise Directory, and
businesses receiving financing through the Small Business
Investment Company program.

Allows the SBA to guarantee loans under the Payment Protection
Program for the period beginning on February 15 through June 30,
2020.

Maximum loan amount is increased from $5,000,000 to $10,000,000
through December 31, 2020.

The maximum loan amount is capped at the lesser of $10,000,000
or a figure determined by applying a formula based on "payroll
costs"

Generally, the payroll cost formula is based on the average
monthly payments by a borrower for "payroll costs"
incurred during the 1-year period prior to loan disbursement
multiplied by 2.5

Proceeds of the loan may be used for:

"Payroll costs,"which includes

Employee salaries, wages, commissions, or similar
compensation

Payment of cash tip or equivalent

Paid vacation, parental, family, sick or medical leave

Separation payments

Payments required for the provision of group health
benefits

Retirement benefits, or

State or local taxes assessed on compensation of employees

Provides delegated authority to lenders participating in the
Payment Protection Program to make borrower eligibility and
creditworthiness determinations, rather than the SBA.

Repayment ability is not taken into lending decision.Rather,
lenders must determine whether the business was operational on
February 15, 2020, and had employees for whom it paid wages and
payroll taxes, or had paid independent contractors.

Borrowers cannot receive assistance under the Paycheck
Protection Program (PPP) loan and an economic injury disaster loan
(EIDL) for the same purpose.

Borrowers with EIDL loans unrelated to COVID-19 can still apply
for a PPP loan, and have an option to refinance the EIDL loan into
the PPP loan

Fees and other requirements waived include:

Borrower and lender fees are waived

Credit elsewhere test is waived

Collateral and personal guarantee requirements are waived

No borrower pre-payment fees

Maximum interest rate of 4 percent

Loan forgiveness:

Borrower is eligible for loan forgiveness in the amount used
for payroll costs, interest payments on a pre-existing mortgage,
rent payments on a pre-existing lease, and utility payments during
the 8-week period after the loan's origination

Eligible payroll costs do not include compensation above
$100,000

Emergency EIDL Grants

Eligibility expanded to include:

With fewer than 500 employees:

Tribal businesses

Co-Ops

ESOPs

Sole proprietors

Independent contractors

Private non-profits

For EIDL loans related to COVID-19 before December 31, 2020:

Personal guarantees waived on advances and loans below
$200,000

1-year in business requirement waived

Credit elsewhere requirement waived

Approval can be based solely on applicant's credit score or
other method for determining ability to repay.

Emergency Grant – Eligible entity can
request advance on a loan up to $10,000 to be distributed within 3
days.

Advance payment can be used for:

Providing paid sick leave to employees

Maintaining payroll

Meeting increased costs to obtain materials

Making rent or mortgage payments

Repaying obligations that cannot be met due to revenue
losses

Unemployment Insurance Provisions

Temporary Pandemic Unemployment Assistance
program through December 31, 2020, for those not traditionally
eligible for unemployment, including:

Self-employed

Independent contractors

Workers with limited work history

Provides payment to states to reimburse the following entities
for half of the costs of unemployment benefits incurred
through December 31, 2020:

Non-profits

Government agencies

Indian tribes

Additional $600 per week for each unemployment
recipient for up to 4 months.

Funding to pay cost of 1st week of unemployment
benefits for states that choose to pay recipients immediately
instead of waiting one week before the individual is eligible.

Additional 13 weeks of unemployment benefits
through December 31, 2020.

Financing for Short-Time Compensation
Payments

For states that already have programs, funding to pay
100 percent of the costs incurred in
"short-time compensation" programs throughDecember 31,
2020, where employers reduce employee hours instead of laying off
employees and the employees with reduced hours receive a pro-rated
unemployment benefit

For states that begin programs now, funding to pay 50
percent of the costs

$100M in grants to states that enact
short-time compensation programs

2020 Recovery Rebates for Individuals

U.S. residents with adjusted gross income up to $75,000
($150,000 married) are eligible for the full recovery rebate
payment of $1,200 ($2,400 taxpayers filing as married).

Taxpayers may receive an additional payment of $500 per
child

Rebate amount is phased-out for taxpayers with adjusted gross
income exceeding $75,000 (or $150,000 filing as married); the
rebate program is reduced by $5 for each $100 that a taxpayer's
income exceeds the phase-out threshold

Rebate amount is completely phased-out for: (1) single filers
with adjusted gross income exceeding $99,000; (2) $146,500 for head
of household filers with one child; and (3) $198,000 for joint
filers with no children; a higher phase-out dollar figure applies
to families with more than one child

Money is expected to go out by April 6.

Retirement Funds

Ten percent early withdrawal penalty for retirement account
distributions up to $100,000 is waived for COVID-19 related
distributions on or after January 1, 2020.

The distributions will be subject to tax over 3 years

Taxpayer can re-contribute within 3 years without regard to
that year's contribution cap

COVID-19 related distributions:

The distributee is diagnosed with COVID-19

His or her spouse or dependent is diagnosed with COVID-19

He or she experiences adverse financial consequences as a
result of being:

furloughed,

quarantined,

laid off,

reduced work hours,

unable to work due to child care issues related to COVID-19,
or

his or her own business closure or hours reduction due to
COVID-19.

Employer Payments of Student Loans

Employers can provide employees with a student loan repayment
benefit tax-free. The employer can contribute up to $5,250
annually toward an employee's student loans with the payment
being excluded from the employee's income. This applies
to any student loan payments made by an employer, on an
employee's behalf, after date of enactment until January 1,
2021.

Employee Retention Credit

The CARES Act offers a tax credit equal to 50 percent of
"qualified wages" paid or incurred to each employee from
March 13 to December 31, 2020.The credit is further limited to
$10,000 of qualified wages.

To be eligible for the employee retention credit, the employer
must be engaged in a trade or business during the 2020 calendar
year and either:

(1) had its operations fully or partially suspended by an order
of a governmental authority; or

(2) had its gross receipts decline by more than 50 percent as
compared to the same quarter in the prior year

"Qualified wages" is determined based on the number
of full-time employees.

For employers with more than 100 full-time employees, qualified
wages only include amounts paid to employees that are not providing
services due to a shutdown order of a governmental authority

For employers with 100 or fewer full-time employees, all
employee wages qualify for the employee retention credit,
regardless of whether the employer is open for business or subject
to a shut-down order of a governmental authority

Deferral of Employer Payroll Taxes

The CARES Act permits employers to defer payment of the 6.2
percent excise tax on wages paid by an employer. The tax can
be paid over a 2 year period; with half required to be paid by
December 31, 2021, and the other half by December 31, 2022.

The deferral of payroll taxes is not available to a person that
has a Paycheck Protection Program loan forgiven under the CARES
Act.

FFCRA

Paid Leave for Rehired Employees

An employee who was laid off on March 1, 2020 or later can have
access to EFMLEA benefits if rehired.

Advance Refunding of Credits

Employers can receive an advance tax credit instead of being
reimbursed on the back end.

Business Tax Provisions

The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act")
limited the ability to use net operating losses
("NOL").The CARES Act temporarily eliminates the
limitations on the use of NOLs.Under the CARES Act a taxpayer is
permitted to carryback NOLs which arise in a tax year beginning in
2018, 2019, or 2020, for five years.The Act further allows a
taxpayer to fully offset taxable income with NOLs for tax year
beginning before January 1, 2021.

The 2017 Tax Act limited the amount of business interest which
a taxpayer may deduct.Prior to enactment of the 2017 Tax Act,
business interest was fully deductible for federal income tax law
purposes.The 2017 Tax Act generally limited the deduction for
business interest to 30 percent of the taxpayer's
"adjusted taxable income".The CARES Act temporarily
increases the limitation on the deductibility of business interest
to 50 percent of the taxpayer's adjusted taxable income for tax
years beginning in 2019 or 2020.

Trade/Tariffs

A number of industry associations urged the U.S. Congress to
delay the proposed June 1, 2020, implementation of the United
States-Mexico-Canada Agreement (USMCA), as well as offer a three
(3) to six (6) month delay on tariff payments arising from Section
301 (China) and Section 232 (steel and aluminum). These
measures did not make it into the final bill and the White House
has expressly rejected the idea of tariff payment delays.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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